As prepared for delivery
afternoon. It is a great pleasure to be
here with you today at the 24th annual ABA/ABA Money Laundering Enforcement
First, as this Conference is
taking place over the Veteran’s Day holiday weekend, I’d like to take a moment
to recognize those brave women and men who have fought in our Armed Forces to
protect our country. To all of our veterans
– and I am sure we have some with us in this room today – and to the families
who support them, thank you.
As Rick mentioned, I
spoke at this Conference in October 2009, during my first year in Treasury’s Office
of Terrorism and Financial Intelligence.
I have now been with the
Treasury Department for almost four years.
And thanks to the President’s re-election last week, I am thrilled to
have the opportunity to continue to lead what I believe is one of most
interesting, innovative and important offices in the U.S. Government.
No matter your political orientation,
no matter who you voted for last week, I think we all can agree that it is
essential to protect our financial system from abuse, to deprive those who seek
to do us harm of critical funding streams, and to use financial pressure to
advance our most pressing national security and foreign policy interests.
That is the mission of my
office. And as the folks here know
better than most, the private sector is an absolutely crucial partner in all
aspects of that mission.
So let me begin by recognizing all that you do – in partnership with us – to pursue this vitally important
Three years ago, I spoke
to this Conference about my office’s work to address some of our toughest illicit
financing threats – fundraising by al Qa’ida and the Taliban, the growing
criminal-terrorist nexus, Iran’s use of the international financial system.
focus of my remarks today will be the work that we are doing – and will be
doing in the coming months and years – to strengthen our domestic anti-money
But before I turn to
that topic, I thought I would give you a brief status report on some of the
issues I discussed when I was here in 2009, and some of the other issues that we
have been focused on over these past three years.
Al Qa’ida Core
When I last spoke to you, I offered
an overview of the state of al Qa’ida’s finances, and particularly the
financial position of al Qa’ida’s central organization – al Qa’ida’s “core.” At the time, we assessed that al Qa’ida core was
in its weakest financial condition in years, and that its influence was
There have been a number of significant
developments since then that have affected al Qa’ida’s financial situation,
including the death of Usama bin Laden. Somewhat
less notably, several of his key financial lieutenants, including Saeed
al-Masri, Atiyah Abd al-Rahman, and Abu Yahya al-Libi also are no longer with
Their deaths, along with continued
international efforts to combat terrorist financing, have degraded the ability
of al Qa’ida’s core to move and manage funds.
Despite progress in
disrupting al Qa’ida’s traditional methods of terrorist financing, we continue to
face another challenge I discussed in 2009:
the increasing nexus between terrorist financing and criminal activity,
in particular, kidnapping for ransom by al Qa’ida’s affiliates in the Sahel
region of Africa and in Yemen.
This is the most significant
terrorist financing threat we face today.
We estimate that terrorist organizations have collected approximately
$120 million in ransom payments over the past eight years, much of that by al
Qa’ida in the Islamic Maghreb – better known by its initials, AQIM.
To combat this growing
threat, we are working closely with our international counterparts to set up three
lines of defense against kidnapping for ransom.
The first is prevention. There is a global effort under way to develop
best practices for governments and industries to reduce the risk that their
citizens and employees will be kidnapped in the first place.
Part of this effort involves
working with the insurance sector to make use of risk management techniques,
and the financial incentives that only the insurance industry can create, to
reduce the likelihood that terrorists will be able to take hostages.
When prevention fails, our
second line of defense is to limit the benefit that hostage-takers can hope to
receive by encouraging governments and others to refuse to make concessions,
including the payment of ransoms.
For many years, it has been the
policy of the United States to refuse to pay ransoms or make any other
concessions to hostage takers. We have
adopted and adhered to this policy because it is the surest means to protect the
lives of our citizens – both by clearly signaling to potential hostage-takers
that they will not be rewarded for their crimes, and by depriving terrorist
groups of the funding necessary to plan and conduct future attacks against our
citizens. Some other countries,
including the United Kingdom, have embraced the same approach, but we still
have work to do with others, particularly in Europe.
When ransoms are paid, our
third line of defense is denial of benefits.
That means working with governments and the private sector to locate,
arrest, and prosecute hostage takers, and, where possible, to locate, freeze
and forfeit the proceeds of their crimes.
Combating kidnapping for
ransom presents some very difficult moral and practical challenges, but we are committed to building the international consensus and
capacity to deprive terrorists of this important revenue stream. In this effort, we need your help – and the
help of your international counterparts – as we seek to deprive terrorists of
the benefits of kidnapping for ransom.
In addition to our efforts on
kidnapping for ransom, we are continuing to combat terrorist financing in a key
region I discussed with you in 2009 – Afghanistan and Pakistan. Our efforts are increasingly focused on the
financial channels, such as hawalas and exchange houses, that are used by
illicit actors to support the Taliban, the Haqqani Network and other insurgent
and terrorist groups in South Asia.
Let me give you one
example. Earlier this year, we acted
against two exchange houses, the Haji Kaihrullah Haji Sattar Money Exchange and
the Roshan Money Exchange, which principally operate in Afghanistan and
Pakistan, for storing and moving money for the Taliban. Reports from the field indicate that the
action significantly disrupted the ability of these entities to facilitate financial
transactions for the Taliban.
In my remarks last time, I
also described the threat we face from transnational organized crime. Since
then, we have taken significant strides in our efforts to protect the financial
system from organized criminal enterprises.
Most importantly, in July of
last year, the President announced the National Strategy to Combat
Transnational Organized Crime. A key
component of the President’s Strategy is a new Executive Order that established
a sanctions program, which we at Treasury are implementing, designed
specifically to disrupt the financial networks supporting transnational
When the President signed the
Executive Order, he named four transnational criminal organizations – the
Brother’s Circle, the Camorra, the Zetas and the Yakuza – and over the past
year we have imposed sanctions on about two dozen senior leaders of these
Last month, we added one new
group, the MS-13 gang, to the list of transnational criminal organizations. Now that MS-13 is designated, we are working
to apply sanctions to its senior leaders and key facilitators, as we continue
to highlight and designate for sanctions the key leaders and support networks
of the original four transnational organized criminal groups.
Section 311 Actions
Against Primary Money Laundering Concerns
Since I was here last, we
have also employed one of our most powerful tools – Section 311 of the PATRIOT Act
– to identify primary money laundering concerns and take action to protect our
In February 2011, we took
action under Section 311 against Beirut-based Lebanese Canadian Bank, when we issued
a finding identifying it as a critical node in a vast trade-based narcotics
money laundering network – a network from which the terrorist group Hezbollah
derived financial support. Since then,
the bulk of the bank’s assets – excluding those accounts that were suspect –
were sold to another financial institution, and the Lebanese Canadian Bank shut
More recently, in May of this
year, we issued a Section 311 finding with respect to a Belarussian Bank,
Credex, to expose highly suspicious transaction patterns through nested
accounts that allowed Credex to access the U.S. financial system. We used Section 311 because the pervasive
lack of transparency surrounding Credex made it virtually impossible to discern
whether the bank was engaged in any legitimate business at all.
And last November,
we employed Section 311 against Iran, identifying
the entire Iranian financial sector
as posing an illicit finance risk.
The Iran 311 action is
just one element of increasing financial pressure we have applied on Iran over
the past three years as part of a dual-track strategy that combines an offer of
engagement to the Iranian government with the certainty of intensifying
sanctions so long as Iran refuses to engage meaningfully on its nuclear
I could fill the
rest of your afternoon with a discussion of our comprehensive, multi-dimensional
and multi-lateral sanctions strategy with respect to Iran, but suffice it to
say, the range, depth, and power of the financial and economic sanctions that
Iran faces today are unlike anything any country has ever encountered.
To give you just a
flavor, since we were last together, we have aggressively implemented the
Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, known
as “CISADA,” which requires foreign financial institutions to choose between
working with designated Iranian banks or working with U.S. banks.
of CISADA has led to a dramatic decrease in the access that sanctioned Iranian
banks have to the international financial system. As I am sure you know, our CISADA
implementation also has included applying sanctions against two banks, Bank of
Kunlun in China, and Elaf Islamic Bank in Iraq, for providing financial
services to designated Iranian banks.
We also have taken
direct aim at the Central Bank of Iran, which was complicit in the illicit activity
of Iran’s designated banks and was critical to Iran’s receipt of oil revenue.
And we have gone
directly after Iran’s most significant source of revenue – its oil sales,
including by applying sanctions against the National Iranian Oil Company (NIOC)
and its oil-trading arm, the NaftIran Intertrade Company (NICO).
And we have done all
this in conjunction with, and in collaboration with, an unprecedented coalition
of international partners that have also taken a series of critically important
steps to impose increasing financial and economic pressure on Iran.
combined with the Iranian government’s own gross mismanagement of its economy, is
having a major impact.
The vast majority Iran’s
banks, including its key state-owned institutions, have been cut off from the
international financial system. Iran’s
petroleum exports – by far the most important source of Iran’s foreign exchange
earnings – have declined approximately 55% this year. And since this time last year, the rial,
Iran’s currency, has lost more than half of its value.
While we believe
that there remains time and space for a diplomatic solution if Iran’s
leadership takes the strategic decision to make meaningful concessions, you can
be sure that we have no intention of relenting on the pressure track so long as
Iran refuses to address in a meaningful and productive way the very serious
concerns with its nuclear program.
And one final item on my
As you know, we have a new
Director of FinCEN, Jennifer Shasky Calvery.
Director Calvery will be speaking to you tomorrow morning, and she will
describe her plans for FinCEN and her vision on where to take FinCEN – plans
and a vision that I share completely.
I don’t want to steal her
thunder, so I will just say this: I could not be more excited that Jennifer Calvery
agreed to serve as FinCEN Director.
She is passionate about
fighting money laundering, she has a wealth of experience from her time in the
Justice Department, and she is a proven leader.
And equally importantly, Director
Calvery is committed to FinCEN working closely with FinCEN’s counterparts within
the government as well as in the regulated community. I am confident that you will find her to be a
tremendous partner in our collaborative efforts to combat money laundering and
other forms of illicit finance in the months and years ahead.
Anti-Money Laundering Initiatives
So that is some of what we’ve
be up to over the past several years.
Many of these issues, of
course, will continue to occupy our time and attention in the months and years
ahead – as they should. And,
undoubtedly, some new issues will arise that will demand our attention.
But there is one area where
we have long been engaged that I know will be the focus of even more attention
in the coming year – and that is our domestic anti-money laundering regulatory,
compliance and enforcement framework, the bread-and-butter of what you do.
Let me explain why.
We all have an interest in a
regulatory framework that protects our financial system from money laundering
while, at the same time, facilitating effective – and cost-effective –
We all want our financial
institutions to be able to comply with well-designed and sensibly implemented
regulatory requirements without incurring undue burden.
And we all have been driving
at this goal. Congress has provided a
strong legislative foundation for anti-money laundering efforts. The regulators have promulgated a range of rules
designed to combat money laundering and terrorist financing. And the banks and other financial
institutions have devoted substantial human and capital resources to
And yet we continue to see
reports that massive amounts of illicit proceeds are laundered through U.S.
financial institutions. We continue to
hear from you that there is a disconnect between what is needed to effectively
combat money laundering and what you are being asked to do. And we continue to see enforcement actions
for deficiencies with respect to some of the most basic AML obligations.
This all highlights the
importance of ensuring that the domestic AML regulatory framework is
appropriately designed, and that compliance efforts are appropriately tuned to
meet the real challenges that we face in combating money laundering and other
forms of illicit finance.
To this end, my office, in
cooperation with other government agencies, is undertaking a number of efforts
to strengthen and clarify our AML framework.
Let me describe two of these
initiatives – the customer due diligence rulemaking process and a new interagency
AML task force.
Customer Due Diligence Rulemaking
As many of you are aware, FinCEN
issued an advance notice of public rulemaking – an ANPRM – earlier this year
seeking comment on an explicit customer due diligence obligation for
ANPRM has two main components.
it seeks to codify existing expectations regarding customer identification,
understanding the purpose of the customer relationship, and account
regulations have been added to implement new legislation and address new
issues, interrelated regulatory obligations have been layered one on top of the
other. What’s more, some important AML
regulatory expectations are implied rather than explicitly imposed.
objective of the proposed rule is to set out customer due diligence obligations
in one, coherent regulation.
draft rule proposes to extend customer due diligence obligations to include a
new requirement to collect information on an account’s beneficial owner.
focus on beneficial ownership is the result of years of engagement with the
financial services industry, law enforcement, international counterparts, NGOs,
government agencies and Congressional committees – you name it – that all have
emphasized one overarching point: Real financial transparency – that is,
accurate information about who benefits from activity in an account – is
essential to identifying elevated risks and stopping illicit activity and
ownership information is invaluable to financial institutions seeking to
understand their risk exposure and to ensure that illicit actors do not abuse
their institutions. And it is tremendously
useful to regulators, law enforcement agencies and national security
authorities seeking to deter, detect, and punish criminal conduct and protect
as you know, financial institutions typically are required to verify only basic
information about their legal entity accountholders, and not to understand the
true beneficial owner of the accountholder.
existing rules require financial institutions to obtain beneficial ownership
information in limited circumstances, we know that, in practice, many financial
institutions often obtain this information even when it is not strictly
required, according to policies and procedures they develop internally over
those policies and procedures vary from institution to institution. This is yet another reason it’s important to
clarify and align requirements to obtain beneficial ownership information. Everyone – industry and government alike – would
benefit from a level playing field.
recognize that a new customer due diligence rule, especially one that contains
an obligation to obtain beneficial ownership information, would be quite consequential.
So we are undertaking this rulemaking a
most of the AML rules, which proceed through the typical NPRM process, we began
with an Advance Notice of Rulemaking.
with possible regulatory language, the ANPRM asks a number of foundational
questions about the existing customer due diligence process and the importance
and difficulty of obtaining accurate beneficial ownership information as part
of that endeavor.
the request of industry, we extended the comment period to allow for additional
gather even more information, we have organized a series of public outreach
events around the country to hear from law enforcement, the regulated industry
and interested citizens about the proposed rule. This began with a hearing last July in
Treasury’s Cash Room, at which we heard testimony from a broad range of industry
representatives, law enforcement, and Congressional staff. Outreach
continued with public roundtables in Chicago, New York, and Los Angeles, with
one more to be held in Miami next month.
We are taking
this approach to ensure that any rule that emerges, assuming one does, is both
sensitive to regulatory burden and improves the effectiveness of our overall
AML effort. We are also taking this
approach because we understand that different types of financial institutions,
as well as different product lines, may present different customer
identification risks and opportunities.
So while we will seek to promote consistency in regulatory requirements across
sectors, we also recognize that a bespoke approach may be best.
AML Task Force
In addition to looking at the
customer due diligence rule, we believe there may be more that we can do – at
an even more fundamental level – to strengthen and clarify our anti-money
To figure this out, my office
has set up a task force with the federal functional regulators and the enforcement
agencies to, in essence, look under the hood and take stock of which components
of our AML regime are working well, which are not, how the different parts are
working together, and to assess how the entire enterprise is operating.
This is a major
undertaking, but it has been more than 40 years since the Bank Secrecy Act was
And while the BSA has
been amended several times – most notably with the enactment of the USA PATRIOT
Act in 2001 – it has been a long time since the federal policymaking,
compliance and enforcement community stepped back and took a hard and
comprehensive look at the AML statutory, regulatory, compliance and enforcement
In addition, as much
as the legal and regulatory landscape has changed in the last 40 years, there
have been even more remarkable changes in the financial industry itself.
Changes driven by
technological innovation, financial innovation, and a desire to include broader
segments of the population in the formal financial sector mean that banks and
other financial institutions are providing financial services to increasingly
distant customers, and are offering their customers a much broader range of
But it’s not just
the products and services that are getting more sophisticated. Money laundering schemes themselves are also becoming
increasingly sophisticated and international in nature. The same hugely beneficial technological and
financial advancements have had the unfortunate side effect of amplifying
potential AML risk.
As the landscape
changes, it is critical that our AML framework remains up-to-date and effective
in keeping illicit funds out of our financial institutions.
why we have created an AML task force among the federal policymakers, the federal
functional regulators and the enforcement agencies – so that we can take a step-back
look at what we’re doing, how we’re doing it, and what we are asking of you, to
combat money laundering and other forms of financial crime.
It is my
hope that we will succeed in developing recommendations to address any gaps,
redundancies or inefficiencies in our framework. And as we go about our work, we will, of
course, seek your views to inform our thinking.
In closing, I want to
thank you again for all that you do to help make our financial system safe,
secure and a crucial engine for economic growth here in United States and
around the world. The depth, breadth and
sophistication of the U.S. financial sector remains the envy of the world. Those of you in this room, who work
day-by-day to protect your institutions, and your clients’ institutions, from
the risk of illicit finance, deserve a great deal of thanks for that.
I look forward to
many more years of close and mutually beneficial collaboration on our shared
mission of combating illicit finance and promoting financial integrity.